Stock market volatility will come and go, but what makes a growth stock truly unstoppable is the strength of the underlying business. Whether a stock is up or down in the near term, if you patiently hold shares of a competitively strong business, you're going to earn great returns sooner or later.
Three phenomenal growth stocks to buy right now are Amazon(NASDAQ: AMZN), MercadoLibre(NASDAQ: MELI), and Home Depot(NYSE: HD). Here's what three Motley Fool contributors have to say about these all-star companies.
Amazon's profitability is piling up
John Ballard (Amazon): Amazon has been a truly wealth-building investment for long-term shareholders. Just over the last five years, the stock has doubled and continues to look strong in 2024.
Amazon is involved in a lot of business opportunities, spanning e-commerce, digital advertising, and cloud computing (e.g., Amazon Web Services, or AWS). E-commerce alone is a multitrillion-dollar market that continues to grow. Trailing-12-month revenue across all these businesses grew 12% year over year to reach $604 billion in the second quarter.
That is a healthy growth rate for such a large business, which speaks to the substantial opportunities ahead. Integrating artificial intelligence (AI) in the shopping experience could allow Amazon to gain share of the online retail market, particularly in areas like apparel. The company is making significant investments in generative AI shopping assistants to make browsing and finding the right items more convenient and easier.
Another reason to consider Amazon an unstoppable growth stock worth owning is the improvement on the bottom line. Amazon is becoming a financial powerhouse, with operating profit nearly doubling year over year in Q2. Its trailing free cash flow has more than doubled over the last five years to $48 billion.
With management focusing on lowering costs, improving operating efficiency, and investing in growth opportunities like AI and cloud services, investors will do very well with Amazon stock in 2025 and for years to come.
Fast-growing in multiple businesses
Jennifer Saibil (MercadoLibre): MercadoLibre is the leading e-commerce retailer in Latin America, and it also has a competitive fintech business. It continues to report high growth and profits despite a volatile Latin American economy and inflation, and if the global economy begins to shape up, it will be well-positioned to benefit even more.
E-commerce is still the company's main business, and it's growing at robust levels. Gross merchandise volume increased 20% year over year in Q2, or 83% on a currency-neutral basis. E-commerce remains underpenetrated in Latin America, which is still moving away from being a largely cash-based society, and that leaves MercadoLibre with a long growth runway in this business alone. It serves a population exceeding 500 million, and it continues to activate new customers who are buying more items and buying more frequently. Even if this was its only business, it would be a standout stock.
But there's so much more. The fintech business is growing even faster and presents massive opportunities. The fintech platform offers digital payments, credit cards, and more on an all-digital app. It has a large credit business with around 20 million users at a cost to serve of less than $1. It's an asset-light, cash-rich business that creates strong financials for the whole company.
Like Amazon, MercadoLibre is leveraging its extensive e-commerce platform for media and advertising with strong results. It has the No. 3 spot in digital ads market share in its region, and ad revenue increased from $436 million to $705 million in 2023.
Total revenue increased 42% (113% currency neutral) year over year to $5.1 billion in Q4, and net income was up from $262 million last year to $531 million this year. Those are typical growth rates.
MercadoLibre stock is outpacing the S&P 500 this year, up 32%, and it could climb much higher as it continues to demonstrate solid performance.
Capitalize on the housing recovery
Jeremy Bowman (Home Depot): The housing market has been on life support since mortgage rates started rapidly rising in 2022. Home prices remain elevated, and the lock-in effect from low mortgage rates during the pandemic has dissuaded Americans from moving.
However, the Federal Reserve recently lowered the fed funds rate (with more cuts likely) which should lead to lower interest rates, and the housing market is starting to show signs of life. Redfin reported that mortgage rate locks jumped 70% from a month ago after the Fed's 50 basis-point rate cut, and mortgage-purchase applications also rose 10%.
Meanwhile, Americans have record levels of home equity that they're eager to tap into for home improvement projects.
Those trends are all good news for Home Depot, the nation's leading home improvement retailer. Home Depot's performance has been sluggish while the housing market has been slow, but it should bounce back in the recovery especially as there's a shortage of millions of homes in the country.
Both presidential candidates have plans to address the housing shortage with proposals that will make it easier to build new homes and make homeownership more accessible, favoring home-improvement retailers like Home Depot.
Additionally, Home Depot is well positioned to capitalize on the rebound after its acquisition earlier this year of SRS Distribution, a leading building-supplies distributor that expanded its addressable market by $50 billion and strengthened its relationship with the pro customer.
Home Depot stock might not look like a bargain right now, trading at a price-to-earnings ratio of 27, but there's a lot of leverage in its business model. Once it returns to growth, profits could move significantly higher, making the stock a winner in 2025.
Should you invest $1,000 in Amazon right now?
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Jennifer Saibil has positions in MercadoLibre. Jeremy Bowman has positions in Amazon, MercadoLibre, and Redfin. John Ballard has positions in MercadoLibre. The Motley Fool has positions in and recommends Amazon, Home Depot, MercadoLibre, and Redfin. The Motley Fool recommends the following options: short November 2024 $13 calls on Redfin. The Motley Fool has a disclosure policy.
